Final Results

PR 34/12

7.00am, Thursday, 21 June 2012

DIXONS RETAIL PLC

Full year results at the top end of expectations

Dixons Retail plc, one of Europe's leading specialist multi-channel electrical retail and services companies, today announces preliminary audited results for the 52 weeks to 28 April 2012.

Key Highlights

·; Group underlying total sales(1) (2) flat in the full year with strong momentum in the final quarter.

- Group like for like sales(3) down 3% in the full year, up 5% in the final quarter.

- Like for like sales in the final quarter up 8% in the UK & Ireland and up 10% in the Nordics

·; Growing share across most markets, particularly in the UK and Northern Europe.

·; Underlying pre-tax profit(1) of £70.8 million (2010/11 profit of £85.3 million).

- Good progress in UK & Ireland and Northern Europe with profits up 15% and 12% respectively

- Offset by weaker performances in Southern Europe and PIXmania.

·; Strong growth in multi-channel with sales up 30% in the second half.

·; Net debt reduced to £104.0 million from £206.8 million year on year.

·; £300 million revolving credit facility signed, extending the maturity date to June 2015.

·; On target to repay £160 million 6.125% Bonds due 15 November 2012 and associated hedge cost of approximately £65 million.

·; Customer satisfaction and advocacy measures continue to show good progress, particularly in the UK.

Financial Highlights

·; Total Underlying Group salesflat at £8.19 billion (2010/11 £8.15 billion).

·; Group gross margins down 0.3% in the full year.

- Gross margins flat in the UK in the full year.

- Northern Europe gross margins down 0.5% in the full year but recovering to flat in the second half.

·; Total loss before tax of £118.8 million (2010/11 loss of £224.1 million), after non-underlying items(1) of £189.6 million, which are predominantly non-cash and comprise the write off of goodwill relating to Unieuro, Kotsovolos and PIXmania.

·; Underlying diluted earnings per share(1) 1.1 pence (2010/11 earnings of 1.6 pence). Basic loss per share for continuing operations 4.3 pence (2010/11 loss per share of 6.6 pence).

·; £60 million of cost reductions delivered in the year with £90 million targeted over the next two years.

Strategic priorities

The Renewal & Transformation plan has made significant improvements to our business. Today we are setting out three strategic priorities that will build on that work and improve our business for customers that we believe will deliver improving returns for shareholders:-

1. Drive a successful and sustainable business model in a multi-channel world

2. Be a leader in each of the markets in which the Group operates

3. Align the Group to leverage consistently our scale and knowhow

Sebastian James, Chief Executive, commented:

"I am pleased that by focusing our efforts on delighting customers, we have outperformed our competitors and ended the year with positive momentum delivering results at the top end of expectations. Against a tough economic backdrop, we have continued to deliver on a clear plan to transform the business and today we are setting out our three strategic priorities to further improve our market position and build a business that is stronger, more profitable and sustainable.

Our service-led business model, now underpinned by the launch of KnowhowTM, is increasingly valued and trusted by our customers and our suppliers. The new financial year has got off to a good start with the trends seen in the final quarter of last year broadly continuing. However, we continue to plan cautiously and manage costs aggressively. Our business is well-positioned for the year ahead."

FINANCIAL SUMMARY

Notes

(1) Throughout this statement, references are made to 'underlying' performance measures. Underlying results are defined as excluding trading results from closed businesses, amortisation of acquired intangibles, net restructuring and business impairment charges and other one off non-recurring items, profit on sale of investments, net fair value remeasurements of financial instruments and, where applicable, discontinued operations. These excluded items are described as 'non-underlying'. The financial effect of these items is shown in the analyses on the face of the income statement and in note 3 to the financial information.

(2) Closed business comprises the operations of PC City Spain.

(3) Like for like sales are calculated based on stores that have been open for a full financial year both at the beginning and end of the financial period and are calculated using constant exchange rates. Customer support agreement sales are excluded from all UK like for like calculations. Operations that are subject to closure have sales excluded as of the announcement date. Stores closed for refurbishment are excluded during the period of closure. All PIXmania store sales are included in like for like sales.

(4) UK & Ireland comprises Currys, CurrysDigital, Dixons Travel, PC World, combined 2-in-1 Currys and PC World, Harrods concession, operations in Ireland, DSGi Business, Dixons.co.uk and KnowhowTM. Like for like sales exclude DSGi Business.

(5) Northern Europe comprises the Elkjøp group, Dixons Travel Denmark and Electroworld in the Czech Republic and Slovakia.

(6) Southern Europe comprises Greece (Kotsovolos), Italy (Unieuro, combined 2-in-1 Unieuro and PC City stores and Dixons Travel Italy) and Turkey (Electroworld).

(7) Earnings Before Interest and Tax (EBIT) equates to underlying operating profit and is defined as underlying earnings from retail operations, after property losses, before deduction of net finance costs and tax.

(8) Free Cash Flow relates to continuing operations and comprises net cash flow from operating activities before special pension contributions, less net finance costs, less income tax paid and net capital expenditure.

(9) Certain statements made in this announcement are forward looking. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future events or results referred to in these forward looking statements. Unless otherwise required by applicable laws, regulations or accounting standards, we do not undertake any obligation to update or revise any forward looking statements, whether as a result of new information, future developments or otherwise.

The Renewal and Transformation plan continues to make significant improvements to our business. Today we are setting out three strategic priorities that will build on that work and improve our business for customers. This will, we believe, deliver improving returns for shareholders through a focus on improving Free Cash Flow generation and EBIT margins, of the Group:-

1) Drive a successful and sustainable business model in a multi-channel world

The way in which a customer shops is fundamentally changing. Our customers tell us that they want advice, to experience products and to ensure they are making the right choices, particularly as these are often major purchases that they will own for several years. The internet empowers customers with lots of information including product knowledge and price transparency. Single channel internet operators have structurally lower costs to sell products and have historically been able to offer highly competitive prices versus store based operators. We have closed the price and cost gap dramatically in recent years and we will now increase our focus on four distinct activities that we believe are the key strengths of our multi-channel serviced based model and will support our competitive advantage going forward:-

i. Work closely with suppliers to harness benefits available to our business model: Suppliers want to ensure that customers not only choose their brands, but also experience the benefits of the latest products they have developed to meet customers' needs. As a multi-channel operator we work with our suppliers to ensure we can explain the benefits of these products and demonstrate them to customers in our stores and our suppliers support us in this work in a number of ways.

ii. Focus on complete solutions for customers: Customers buy products in order to achieve something, such as watching movies, or to entertain the children. This does not just mean buying the hardware, but increasingly includes delivery, explanation and peace of mind through product support and after sales services, as well as accessories and recycling. The conversations our colleagues have in store with customers give us an opportunity to explain the benefits of these solutions. Our KnowhowTM brand in the UK offers customers one cohesive services brand. We are confident that there are increasing opportunities emerging in the added value services market as customers become more reliant on content, cloud, services and technical support that enable customers to get the most out of the products they buy.

iii. Drive our service proposition: We need to ensure that customers recognise Dixons Retail for great service. We need to be able to stand shoulder to shoulder with our customers and they need to know they can come to our stores and get knowledgeable advice to help them buy the right product. They need to be confident that we will solve their problem for them quickly and efficiently. If we get this right we believe that customers will be prepared to pay us for this service.

iv. Reduce costs: The scale of our operations across stores, ranges, logistics, distribution, repairs and services means that we can continually improve processes to reduce costs. Over the last five financial years the Group has removed a total of £285 million of costs and we are targeting a further £90 million of costs to be removed over the next two financial years.

2) Be a leader in each of the markets in which the Group operates

We have strong market positions in the UK & Ireland, Northern Europe and in Greece. In each of these markets we have seen consolidation amongst competitors and we see opportunities to improve these positions further as we implement the initiatives discussed above. Across the Southern European division and in PIXmania we need to set these businesses on paths that will make them strategically strong and profitable, and drive solutions that will put them on firmer footings.

While the economic environment in Greece is very tough, Kotsovolos is a strong brand and has a leading market share. We believe that this business will be able to continue to leverage its position to grow its share and manage costs aggressively. Our Italian business has continued to make progress against economic headwinds and in the short term we will continue to take aggressive action on costs as well as improve the stock and cash position.

PIXmania has one of the largest non-food pure-play platforms in Europe and represents a valuable source of insight and information on this segment of the market. It has expanded its ranges, offering both directly and through PIXplace and it has exploited its E-merchant platform by offering hosting services to third parties, most notably Carrefour. However, its recent performance has been disappointing. In the light of the changing business model facing internet operators we are reviewing much of PIXmania's activities to focus on those that deliver a competitive advantage going forward, such as product diversification, multi-channel offering and e-commerce provider for third parties. Together with cost reductions we are confident that we can reduce the losses experienced in the year just finished.

3) Align the Group to leverage consistently pan-European scale and knowhow

The Group has many best practices in each of its business divisions. Some work has taken place to align these and share them across the Group, such as the new store formats, supplier relationships and to a limited degree own brands. However there remain many opportunities to share knowledge, expertise and best practice across the Group. Some of these will take time, but we must exploit further the benefits of being a pan-European operator.

Delivering on these priorities will build on the improvements already delivered by the Renewal and Transformation plan and enable the Group to improve its EBIT margin going forward as well as strengthen our focus on cash generation.

Our UK & Ireland and Northern Europe divisions together delivered a 2.7% EBIT return after associated central costs in the 2011/12 financial year. We believe that a 3-4% EBIT return for these businesses is certainly achievable. In the other businesses returns have been disappointing and we need to focus on reducing the losses to support an improvement in the Group's EBIT return.

Cash is an important part of this and the Group has been cash generative in each of the last two financial years which has enabled us to more than halve our net debt position to £104 million. As a Group we need to make the right choices as to how each of our divisions utilise or preserve cash, whether it be determining ranges and stock held in store, managing returns and related processes, improving working capital and stock turn.

Underlying Group sales were flat at £8,186.7 million (2010/11 £8,154.4 million) and down 3% on a like for like basis, outperforming local markets in general. Underlying Group sales were also flat at constant exchange rates. Underlying profit before interest and tax was £115.1 million (2010/11 profit of £127.6 million). Underlying profit before tax was £70.8 million (2010/11 profit of £85.3 million). Group gross margins were down 0.3% across the full year and down 0.1% in the second half.

Total sales in the UK & Ireland division were down 2% to £3,833.9 million (2010/11 £3,925.3 million) and like for like sales were down 4%. Like for like sales in the second half were flat, showing an improving trend with the final quarter up 8%. Underlying operating profits increased to £78.8 million (2010/11 £68.7 million).

The UK & Ireland division has performed strongly against a tough market. The benefits of the work under the Renewal and Transformation plan increasingly benefitted the business through the year with a particularly strong performance in the final quarter. This enabled the division to grow operating profits by 15% in the year putting the business on track towards a sustainable return.

We have made significant progress with our multi-channel business during the year, particularly in the second half which saw growth of 48%. Improvements to availability and processes have improved the experience for customers. We are planning further improvements in the year ahead as we deliver a seamless experience for our customers.

We now have 269 refurbished stores which continue to deliver average gross profit uplifts of over 20% in the first year and maintained in the second and third years. A further 63 stores are expected to be reformatted in the year ahead, predominantly in the 2-in-1 CurrysPCWorld format, resulting in three quarters of sales going through new format stores by Christmas Peak this year. We have analysed the store estate as we increasingly integrate online and stores and currently believe that in the UK we need 400 to 420 stores to provide the right level of service and convenience for customers. This includes approximately 40 high street stores similar to our CurrysPCWorld Black store in the Westfield centre, Stratford with the remainder large out of town stores (Megastores and Superstores), predominantly in the 2-in-1 format.

In May this year KnowhowTM celebrated its first anniversary after a successful first year growing by 40%. The added value services market is very fragmented and we are confident that we can continue to grow in this market. During the year KnowhowTM launched a number of new services including fault & fix, Cloud back up & share and Movies.

In March we opened a store in Harrods which has had an encouraging first three months. This is an exciting opportunity which provides us with some useful learnings for store design, product display, high end-high value ranges as well as extending our KnowhowTM services.

The launch of the new iPad helped grow the overall computing market. With Ultrabooks now being released into the market and further developments in operating systems, in particular the launch of Windows 8 later in the year, there is the potential for this category to continue to grow. White goods showed modest growth, but are predominantly driven by the housing cycle. Technical innovation and energy efficiency is increasingly giving customers reasons to replace or upgrade. The consumer electronics market was weak through the year, however in televisions we believe we traded ahead of the market, particularly in the fourth quarter with sales of large flat TVs up 25% in value.

Dixons Travel continues to perform well. The new format now rolled out across all of Dixons Travel's stores delivers a better range and store experience for customers, including a focus on portable items and accessories.

Northern Europe, which comprises the Elkjøp group, the Electroworld operations in the Czech Republic and Slovakia and Dixons Travel in Denmark continues to perform well. Sales grew by 8% at constant exchange rates, while in sterling, underlying sales grew by 11% to £2,628.0 million (2010/11 £2,375.6 million). Like for like sales were up 6%. Underlying operating profits were £113.9 million (2010/11 £102.1 million).

Overall, Elkjøp had a very strong year, particularly in Denmark. Disruptive activity from businesses exiting the markets in Sweden, Norway and Denmark, as well as competitor activity, impacted gross margins in the first half. However, as some of these factors abated the business delivered strong gross margin growth in the final quarter, resulting in full year operating profits being up 12% year on year.

Elkjøp's highly efficient central operating model continues to lead the way in simplicity and cost management and we are starting to adapt the model to other markets across the Group, particularly as we deliver on our three key priorities.

Elkjøp now operates 28 Megastores which continue to perform particularly well. It also has 42 reformatted Superstores.

The operations in the Czech Republic and Slovakia are now managed out of the Nordics. As a result costs have been streamlined and by investing in the customer offer Electroworld has grown strongly through the year with like for like sales up 13% and ahead of their markets.

This division comprises operations in Italy, Greece and Turkey. Total sales were down 3% at constant exchange rates and down by 5% in sterling to £1,059.8 million (2010/11 £1,120.0 million), with like for like sales down 8%, largely as a result of the weak economic environments being experienced in Greece and Italy. Underlying operating loss was £30.4 million (2010/11 loss of £18.1 million).

The economic environment in Greece remained difficult through the year. Kotsovolos remains the market leader and is able to leverage its market position and strong supplier relationships to grow its market share. Despite further pressure on gross margins Kotsovolos again showed robust cost management to keep losses to a minimum. The outlook remains uncertain, but with a focus on customer service and cost management we believe Kotsovolos will continue to out-perform its competitors.

The economic crisis deepened during the year and as a result management took action on costs, however the impact on mitigating the losses in the year was limited as the benefits of these actions began to come through later in the year. We are taking further actions on costs and working hard to improve the estate and competitiveness in the market. Encouraging progress was made in specific product segments towards the end of the year. Unieuro now operates 148 stores, with 26 in the new format and 54 being franchise operations.

The Group now operates 15 stores in Turkey, as well as 15 franchise stores. Strong growth in the first half moderated as the year progressed, but total sales grew by 41% in local currency across the year while like for like sales were up 14% in a growing market. Franchising continues to offer an opportunity to roll out the Electroworld brand across Turkey, particularly in towns that are geographically spread across the country, for relatively little cost.

Total sales were £665.0 million (2010/11 £733.5 million) with like for like sales down 10%. Underlying operating loss was £19.8 million (2010/11 profit of £3.5 million).

PIXmania experienced a very difficult year with a number of factors impacting performance, some of which could not have been foreseen. The photography, camcorder and hard disc drive categories have been a significant proportion of the sales mix and higher margin categories for the business. The natural disasters in Japan and Thailand severely limited the supply of these products and as a result sales and profitability were impacted. Its core Southern European markets have been weak and PIXmania has experienced the negative impact of the shift towards multi-channel operators in our markets.

PIXmania has been evolving its business model through:-

·; Steady growth in new categories underpinning its multi-specialist positioning, expanding into toys, sports goods, home furniture, beds and mattresses as well as jewellery;

·; PIXmania's market place, PIXplace, continues to grow strongly with over 1,500 active third party resellers offering over 1.5 million products in 26 countries;

·; Extending its store network to 20 PIXmania branded stores which provide customers in major cities with a multi-channel offering;

·; Further investments in E-merchant, its market leading e-commerce platform for third party customers. Most notable of which has been for Carrefour which successfully launched in November 2011. More recently PIXmania won the Celio contract, one of France's largest menswear brands with a launch planned for the summer 2012; and

·; Streamlining processes and reducing costs.

FINANCIAL POSITION

Many of the markets in which the Group operates remain challenging. In spite of this the Group has delivered a robust performance against the financial priorities of profitability and strengthening the balance sheet:

·; Costs reduced by £60 million in the year, as part of the three year £150 million cost reduction programme;

·; Completion of sale and leaseback of Swedish warehouse in June, raising £58.1 million;

·; Significant headroom maintained on the Group's revolving credit facility (the RCF) throughout the year, with the facility unused throughout the second half and extended to June 2015;

·; Positive Free Cash Flow before restructuring items of £174.1 million was generated;

·; Net debt was reduced to £104.0 million compared to £206.8 million at the end of the 2010/11 financial year; and

·; Agreement reached with the trustee of the UK defined benefit scheme following the triennial valuation with an 11 year deficit reduction plan, with payments of £16 million made in 2011/12 and £20 million to be made in 2012/13.

Free Cash Flow was £130.3 million (2010/11 Free Cash Flow of £10.0 million). The improved cash result arose partially from the sale and leaseback of the Jönköping warehouse in Sweden, and we have continued our transformation of stores with lower levels of capital expenditure as the Group conserved cash to improve liquidity in advance of the 2012 Bond repayment due on 15 November 2012.

Working capital inflow was £15.8 million (2010/11 £40.4 million). This positive inflow was despite an adverse reversal of a £30 million timing benefit experienced at the end of the prior year relating to the exit from Spain and the additional UK bank holiday. The continued strong performance largely reflects further improvements to stock management, while continuing to improve availability, range and promotion management. Overall Group stock levels year on year were down 9% (5% excluding the impact of currency changes).

Net restructuring reflects the cash outflows relating to the strategic reorganisation activities as announced in this and previous years. This year these include costs of £24.3 million associated with the closure of operations in Spain.

At 28 April 2012 the Group had net debt of £104.0 million, compared with net debt of £206.8 million at 30 April 2011.

Net debt is stated inclusive of restricted funds of £114.0 million (2010/11 £120.3 million), which predominantly comprise funds held under trust for potential customer support agreement liabilities.

The improvement in net debt was due to the Free Cash Flow generated, partly offset by £16.0 million paid to the UK defined benefit pension scheme under the terms of the deficit reduction plan (2010/11 £12.0 million). Other items predominantly comprise the impact of foreign exchange currency movements on cash balances held in foreign subsidiaries. The gain on other items in the prior year included a £10.2 million gain arising on the notional cancellation of interest rate swaps which were previously in a designated hedge relationship on the portion of the 2012 Bonds redeemed last year.

The Group's RCF was unutilised at 28 April 2012, and throughout the second half of the financial year.

Underlying profit before tax is reported before net non-underlying charges before tax of £189.6 million. The continuing weak consumer environment, in particular in Southern Europe, impacted the financial performance of certain of the Group's businesses with the outlook remaining uncertain. This has resulted in the value of the goodwill acquired with Unieuro, PIXmania and Kotsovolos being further impaired. A further explanation of these and other items comprising the non-underlying items is set out below:

·; Trading results from closed business relate to the former PC City operations in Spain.

·; Amortisation of acquired intangibles of £4.5 million predominantly comprises brand names.

·; Net restructuring charges relate to the exceptional elements of the UK business transformation (£9.7 million) and the re-organisation of the photo processing businesses in PIXmania (£6.6 million). In the UK, the costs comprise mainly accelerated depreciation charges associated with the reformat of the UK & Ireland store portfolio, onerous lease charges and redundancies. In PIXmania, charges comprise mainly onerous lease charges, redundancies and contract termination costs.

·; Business impairments of £196.0 million relate to Unieuro, Kotsovolos and PIXmania, and arise following consideration of the ongoing difficult economic environments in which these businesses operate, and the behind expectation results seen in 2011/12. The charges are primarily non-cash and include:-

- £131.1 million relating to Unieuro, the Group's Italian business. The majority of this cost (£109.4 million) relates to goodwill with the balance relating to other fixed assets, onerous lease costs and store closure costs. Following this impairment there remains £26.6 million of goodwill relating to this business;

- £36.5 million relating to Kotsovolos, the Group's Greek business. This represents full impairment of the goodwill relating to this business; and

- £28.4 million relating to PIXmania, representing approximately 1/3 of the value of goodwill held at the beginning of the year.

·; Profit of £37.2 million arises on the sale (and subsequent leaseback) of the Group's Nordic distribution centre in Jönköping, Sweden.

·; Other items of £1.6 million comprise:

- Net costs of £3.2 million which relate to the UK riots with such costs of £3.5 million relating mainly to stock write offs and repair costs to damaged properties and are shown net of insurance recoveries received to date of £0.3 million; and

- An upwards revaluation of £1.6 million (required by accounting standards) of a small Nordic associate shareholding following the acquisition of the remaining shares in that entity.

·; The financing charge comprises the following elements:

- £0.1 million of interest charges relating to the closed PC City operations in Spain;

- £2.8 million of net fair value remeasurement losses on revaluation of financial instruments as required by IAS 32 and 39; and

- Accelerated amortisation of facility fees which relate to the refinancing activities and comprise the write off of fees relating to the amendment of the £360 million revolving credit facility to a £300 million revolving credit facility in May 2012. Equivalent fees relating to the £300 million revolving credit facility are being amortised into underlying results in the same manner as the historical facility fees. Gains and charges in the prior year relate to the refinancing that occurred in July 2010.

Underlying property losses were £13.6 million (2010/11 loss of £12.8 million). These comprise mainly store re-site and store asset disposal costs associated with the Renewal and Transformation plan, predominantly in the UK and Nordics.

Underlying net finance costs were £44.3 million (2010/11 £42.3 million). The increase in costs was primarily due to:

·; The effect of the higher coupon rate on the 2015 Notes, which were issued part way through the first half of the prior year;

·; Higher net foreign exchange losses compared to the prior year; and

·; Increased Euribor and Libor interest rates during the year, affecting floating rate swap income.

The Group's underlying tax charge equates to an effective rate of 51% (2010/11 37%). The increase in the full year tax rate reflects losses where no tax benefit has been recognised, the non-recurrence of one off releases in the prior year of surplus tax provisions following favourable outcomes and the increased proportion of non-deductible items (which are comparatively fixed in amount) taken as a percentage of the reduced profit before tax figure.

The IAS 19 accounting deficit of the defined benefit section of the UK pension scheme amounted to £261.9 million compared to £244.0 million at 30 April 2011. The assumptions used for determining the accounting valuation use a consistent basis to that adopted at 30 April 2011 which build from the most recent actuarial valuation as at 31 March 2010.

The deficit has increased as a result of an increase in the liabilities which was greater than the increase in assets. The increase in the liabilities was driven by a decrease in the discount rate applied to the liabilities (which increases their value) which has been offset in part by a decrease in the expectation of long term inflation which has an overall limiting effect on the increase in liabilities.

A full triennial actuarial valuation of the UK defined benefit pension scheme as at 31 March 2010 showed a shortfall of assets compared with liabilities of £239.0 million. A "recovery plan" based on this valuation commenced in 2010/11 with payments of £12.0 million which rose to £16.0 million in 2011/12 and will rise to £20.0 million in 2012/13 and 2013/14, rising approximately annually thereafter to £35.0 million by 2020/21. The next triennial valuation is expected to commence in March 2013.

Consolidated Income Statement

* Underlying profit and earnings per share measures exclude the trading results of closed businesses, amortisation of acquired intangibles, net restructuring and business impairment charges and other one off, non-recurring items, fair value remeasurements of financial instruments and, where applicable, discontinued operations. Such excluded items are described as 'Non-underlying'. Further information on these items is shown in notes 1, 3, 4, 5 and 6.

** Closed business relates to the operations of PC City Spain which were closed in June 2011. This closed business does not meet the definition of discontinued operations as stipulated by IFRS 5 and accordingly the disclosures within non-underlying items differ from those for applicable discontinued operations.

Consolidated Statement of Comprehensive Income and Expense

Consolidated Balance Sheet

The financial statements were approved by the directors on 21 June 2012 and signed on their behalf by:

Consolidated Cash Flow Statement

 (i) For the purposes of this cash flow statement, cash and cash equivalents comprise those items disclosed as 'cash and cash equivalents' on the face of the balance sheet, less overdrafts, which are classified within current liabilities on the face of the balance sheet. A reconciliation to the balance sheet amounts is shown in note 7.

(ii) Free Cash Flow comprises those items marked * and comprises cash generated from / (utilised by) continuing operations before special pension contributions, less net finance expense, less income tax paid and net capital expenditure. The directors consider that 'Free Cash Flow' provides additional useful information to shareholders in respect of cash generation and is consistent with how business performance is measured internally.

Consolidated Statement of Changes in Equity

Non-controlling interests (minority interests) comprise shareholdings in Pixmania S.A.S. (PIXmania), Electroworld Iç ve Dis Ticaret AS (Electroworld Turkey) and Dixons South-East Europe A.E.V.E. (Kotsovolos).

Notes to the Financial Information

1 Basis of preparation

The financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income and expense, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity and extracts from the notes to the accounts for 28 April 2012 and 30 April 2011, has been prepared in accordance with the accounting policies set out in the full financial statements and on a going concern basis. The directors have considered the Group's strategy and risks to achieving objectives which are set out in this announcement, together with its liquidity and funds position. Having concluded that the Group has adequate resources to continue in operational existence for the foreseeable future, the directors have continued to adopt the going concern basis in preparing the financial statements.

The financial information set out in this announcement does not constitute statutory accounts within the meaning of Sections 434 to 436 of the Companies Act 2006 and is an abridged version of the Group's financial statements for the 52 weeks ended 28 April 2012 which were approved by the directors on 21 June 2012. Statutory accounts for the 52 weeks ended 30 April 2011 have been delivered to the Registrar of Companies, the auditors have reported on those accounts, their report was unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. Statutory accounts for the period ended 28 April 2012 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts, their reports were unqualified and did not contain statements under Section 498 of the Companies Act 2006.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, IFRS issued by the International Accounting Standards Board and those parts of the Companies Act 2006 applicable to those companies reporting under IFRS.

The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings for the 52 weeks ended 28 April 2012. Comparative figures are for the 52 weeks ended 30 April 2011.

The directors consider that the 'underlying' performance measures, together with the associated Income Statement presentation, provide additional useful information for shareholders on underlying performance of the business, and are consistent with how business performance is measured internally. Such measures exclude the trading results of closed businesses, impact of amortisation of acquired intangibles, net restructuring and business impairment charges and other one off, non-recurring items, profit on sale of investments, fair value remeasurements of financial instruments and, where applicable, discontinued operations. These measures may not be directly comparable with 'adjusted' profit measures used by other companies.

2 Segmental analysis

The Group's operating segments have been determined based on the information reported to the Board. This information is predominantly based on geographical areas which are either managed separately or have similar trading characteristics such that they can be aggregated together into one segment and in the case of PIXmania, as a business area with geographical territories aggregated. Accounting policies for each operating segment are the same as those for the Group as described in note 1. The Group evaluates each operating segment based on underlying operating profits which excludes those items described in note 1.

All segments are involved in the multi-channel sale of high technology consumer electronics, personal computers, domestic appliances, photographic equipment, communication products and related financial and after-sales services. The principal categories of customer are retail, business to business and on-line.

The Group's reportable segments have been identified as follows:

■ UK & Ireland comprises electrical and computing retail chains as well as business to business (B2B) activities and Dixons.co.uk, a pure play on-line retailer. The division is engaged predominantly in multi-channel retail sales, associated peripherals and services and related financial and after sales services and also in business to business sales of computer hardware and software.

■ Northern Europe operates in Norway, Sweden, Finland, Denmark, the Czech Republic, Slovakia, Iceland, Greenland and the Faroe Islands. The division engages in multi-channel retail sales and provided related product support services to its customers. It also engages in B2B sales of computer hardware, software and services. Across the region, the division operates a successful franchise business, typically in smaller markets.

■ Southern Europe comprises operations in Italy, Greece, Turkey and the closed business in Spain which is excluded from underlying results. The division engages in retail sales (including multi-channel sales in some countries) and provides related product support services to its customers in all of its markets. It also engages in B2B sales of computer hardware, software and services in Italy and Greece and has franchise operations in Italy, Greece and Turkey.

■ PIXmania is a pure play online retailer and operates in 26 countries across Europe.

During the period, management responsibility for Dixons.co.uk was transferred from the Pure play e-commerce division (now renamed PIXmania) to UK & Ireland. In addition, management responsibility for the Central European operations was transferred from the Other International division (now renamed Southern Europe) to the Northern Europe division. Comparative figures have been restated to reflect these changes in responsibility.

Closed business relates to PC City Spain which was closed in June 2011. Owing to its closure rather than disposal, this operation does not meet the definition of discontinued operations as stipulated by IFRS 5.

Income statement

External revenue for Southern Europe includes £6.5 million relating to the closed business.

Reconciliation of underlying profit / (loss) to total profit / (loss)

Share of post-tax results of associates relates to Northern Europe.

Income statement

External revenue for Southern Europe includes £187.4 million relating to the closed business.

Reconciliation of underlying profit / (loss) to total profit / (loss)

Share of post-tax results of associates relates to Northern Europe.

3 Non-underlying items

2011/12:

■ Italian business: The current increased macro-economic uncertainties, which have contributed to further weakness in the Italian economy, which was particularly evident over the Peak trading period, together with an expectation that growth in the Italian economy will be significantly less than previously forecast, have led to an impairment to the goodwill of Unieuro, as well as impairment charges to property, plant and equipment and property charges comprising onerous lease costs.

■ PIXmania and Greek business: Continuing weakness in the Southern European economies in which PIXmania operates which includes Greece, and which was again particularly evident over the Peak trading period, together with further delays to economic recovery now anticipated, has resulted in profit performance continuing to fall further behind that envisaged in the prior period's forecasts. This has therefore led to an impairment to the goodwill in these businesses.

2010/11:

■ The closed business relates to PC City Spain following the closure of these operations in June 2011 and comprised the full impairment of goodwill as well as other tangible and intangible asset impairments. Property charges comprised onerous lease costs and charges related to vacating properties. Other charges related predominantly to employee severance.

■ PIXmania: Weakness in the Southern European economies, investment in developing new web platforms and changes in the internet retailing market caused profit performance to be behind that envisaged at the time of the acquisition of the business and this therefore led to an impairment to the goodwill.

■ Greek business: Following an extended period of economic difficulty and the expectation that a full recovery will be prolonged, an impairment to the goodwill was recognised.

■ Associate: Relates to a long period of decline in the results of F-Group leading to the conclusion that the carrying value of the investment (which incorporates prior year dividends received) was impaired.

2011/12:

■ Profit on disposal of property relates to the sale and leaseback of the Group's Nordic distribution centre in Jönköping in Sweden. The sale completed on 23 June 2011 for SEK 602 million (£58.1 million). Owing to the size of the gain as well as the significance of the property in relation to the Group's operations, the profit has been treated as a non-underlying item.

■ UK Riot related net costs comprise mainly inventory write offs and reinstatement costs together with certain other incremental costs arising from the riots which occurred in August 2011 and which amounted to £3.5 million. These amounts have been offset by insurance recoveries received to date of £0.3 million, with further insurance claims outstanding.

■ Revaluation of associate shares: Relates to gain arising on the revaluation of a previous small associate shareholding following the acquisition of the remaining shares during the period.

2010/11:

■ Impairment of other intangibles work in progress related to capitalised system costs in the UK from 2008 following the decision to defer the project in order to focus on existing process improvements.

■ The exceptional supplier balance write offs related to supplier receivables in PIXmania dating back to 2008/09 and prior years. This write off arose due to the culmination of a reconciliation process following the implementation of new systems highlighting the extent of the receivables outstanding and a detailed review of the Group's ability to recover these balances.

■ Credits related mainly to closed businesses and represent cash recoveries from third parties which due to their contingent nature had not previously been recognised.

4 Net finance costs